Vietnam has 17 trade agreements and uses barely any of them. Officials in Ho Chi Minh City put preferential certificate uptake under 10 percent for CPTPP and warn that tariff margins alone no longer win markets.
HO CHI MINH CITY, September 28, 2026
Vietnam’s Ministry of Industry and Trade has set out an uncomfortable diagnosis of the country’s trade agreement network: the agreements exist, the tariff margins are real, and Vietnamese exporters are largely not using them.
Speaking at a conference in Ho Chi Minh City reported on Monday, Ngo Chung Khanh, deputy director general of the Multilateral Trade Policy Department at the ministry, laid out the numbers. Utilisation rates for preferential certificates of origin stand below 10 percent under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, 34 percent under the European Union-Vietnam Free Trade Agreement, and 38 percent under the United Kingdom-Vietnam Free Trade Agreement.
Those figures describe a large gap between negotiated access and realised benefit. Vietnam has 17 free trade agreements in force, one of the densest networks of any middle-income economy, and is negotiating further preferential arrangements including with Brazil that would offer near-zero tariffs. Yet in the agreement where the tariff margins are largest relative to competitors, the CPTPP, fewer than one shipment in ten claims them.
Khanh’s central argument was that the challenge has shifted from acquiring agreements to converting commitments into market share, and that the conversion now requires compliance capability rather than price competitiveness.
The market share problem
The utilisation figures sit alongside a second set of numbers that make the point differently.
In 2023 Vietnam accounted for roughly 2 percent of the European Union’s 2.51 trillion dollar import market, a proportion that has remained stagnant over the past six years despite the EVFTA entering into force in 2020. Similar patterns hold in Canada, the United Kingdom and Mexico, where Vietnamese market shares move between 1 and 2 percent.
The Mexican case is the sharpest illustration. Mexico applies import duties of up to 50 percent on goods from Asian competitors that lack a preferential agreement. Vietnamese products, covered by the CPTPP, enjoy what Khanh described as massive tariff margins against those competitors. Vietnamese market share in Mexico sits just above 1 percent.
A tariff advantage of that magnitude, unexploited, is the clearest possible evidence that something other than duty rates determines market outcomes. The candidates are familiar: distribution relationships, brand recognition, credit terms, logistics reliability, product specification fit, and the administrative capability to claim the preference in the first place.
Why utilisation is so low
Preference utilisation rates below 10 percent are unusual even by the standards of a system where underuse is common, and the causes in Vietnam’s case are identifiable.
The first is rules of origin. The CPTPP’s product-specific origin rules are demanding, particularly in textiles and apparel, where the yarn-forward requirement obliges producers to source yarn and fabric from within the agreement area. Vietnam’s textile and garment sector is built on Chinese fabric, and China is not a CPTPP party. A garment exporter using Chinese fabric cannot claim CPTPP preference regardless of how much value is added in Vietnam. That single structural fact explains a large share of the low CPTPP number.
The second is the composition of the export base. Approximately 80 percent of Vietnam’s exports originate from foreign direct investment enterprises, up from a position fifteen years ago when domestic firms accounted for close to half. Foreign-invested exporters typically ship to affiliated buyers within a global group, and the preference decision is made at group level with reference to the group’s overall tariff and transfer pricing position rather than shipment by shipment. Where the group’s supply chain does not qualify, or where the administrative cost of qualifying across many product lines exceeds the benefit, the preference goes unclaimed.
The third is the cost of claiming. Obtaining a preferential certificate of origin requires documentation of input sourcing, production processes and value calculation. For a small exporter shipping modest volumes at thin margins, that cost can exceed the duty saved, particularly where the most favoured nation rate in the destination is already low. Preference underuse is rational at the level of the individual shipment even where it is collectively costly.
The fourth is awareness. Vietnam’s agreement network has expanded rapidly, and the number of exporters who can state accurately which agreements cover their destination markets, what rates apply and what origin rules govern their products is smaller than the network’s size suggests.
Background: how Vietnam built the network
Vietnam’s 17 agreements were assembled over roughly two decades in three distinct phases, and the sequence explains why the network is broad but unevenly used.
The first phase was regional. As an ASEAN member from 1995, Vietnam acquired the ASEAN Free Trade Area and, through it, ASEAN’s external agreements with China, Korea, Japan, India, Australia and New Zealand. These came as a consequence of membership rather than as individual negotiations, and their origin rules are relatively accommodating, built around regional value content thresholds that Vietnamese assembly operations can generally meet. Utilisation under the ASEAN-China agreement in particular has historically been among Vietnam’s highest, for the straightforward reason that the inputs and the preference come from the same place.
The second phase was bilateral and high-standard. The agreements with Japan and Korea, and later the EVFTA and UKVFTA, were negotiated individually and brought deeper commitments in services, procurement and regulatory cooperation along with stricter origin rules. The EVFTA in particular was negotiated over eight years and included labour and sustainable development chapters that required legislative change in Vietnam.
The third phase was plurilateral and strategic. Vietnam joined the Trans-Pacific Partnership negotiations and remained in the successor CPTPP after the United States withdrew. The Regional Comprehensive Economic Partnership followed. The CPTPP was, and remains, the agreement with the most demanding rules of origin and the largest potential tariff margins, which is precisely why its utilisation rate is the lowest.
That correlation is the heart of the matter. Across the network, the agreements with the most valuable preferences are the ones with the strictest conditions, and the agreements whose conditions Vietnamese firms can easily meet are the ones whose preferences are worth least. A country that sources heavily from a large neighbour outside the high-standard agreements will find that pattern difficult to break through negotiation alone.
The yarn-forward problem in detail
Because textiles and garments account for a substantial share of Vietnam’s exports and an even larger share of its domestic-firm exports, the CPTPP’s textile origin rule deserves particular attention.
The yarn-forward rule requires that the yarn used in a garment, the fabric woven or knitted from it, and the cutting and sewing all take place within the agreement area for the finished garment to qualify as originating. It was designed by the original negotiating parties to prevent the agreement’s textile preferences from flowing to non-party fabric producers.
Vietnam’s garment industry is built on imported fabric, overwhelmingly from China and to a lesser extent from Korea and Taiwan. Korea is not a CPTPP party; Taiwan is not; China is not. The consequence is that a large proportion of Vietnamese garment exports cannot meet the rule however much labour and value is added domestically.
Two mitigations exist within the agreement. A short supply list allows the use of non-originating fabrics that are not commercially available within the agreement area. A de minimis provision permits a small percentage of non-originating material by weight. Neither is broad enough to cover a supply chain built on imported fabric as a matter of course.
The structural answer would be domestic fabric production at scale, and Vietnam has pursued that through investment incentives for textile mills and industrial park development. Progress has been slowed by the water treatment requirements of dyeing and finishing, which have met environmental resistance at provincial level, and by the capital intensity of the segment relative to garment assembly.
Until that changes, the CPTPP utilisation figure will stay depressed for reasons that no amount of exporter education can fix. That is worth stating plainly, because it means part of the gap Khanh identified is a capability problem that better documentation would solve and part of it is an industrial structure problem that documentation cannot touch.
The value capture question
Khanh raised a second issue that runs deeper than utilisation.
The 80 percent foreign direct investment share of exports, against a domestic share that was close to half fifteen years ago, describes an economy whose export turnover has grown while domestic value capture has not kept pace. Vietnam exports more each year, and a declining proportion of the resulting value accrues to Vietnamese-owned firms.
That is not a criticism of foreign investment, which built the export base and continues to sustain employment at scale. It is a statement about the next stage. An economy that wants to move from assembly toward higher value activities needs domestic firms capable of capturing more of the chain, and preference utilisation is one measure of whether those firms are engaging with the international trading system on their own account or simply supplying into someone else’s.
The link between the two issues is direct. Foreign-invested exporters have compliance departments, customs specialists and group-level trade functions. Domestic small and medium enterprises do not. If preference claiming requires documentation capability, then low utilisation is partly a proxy for the weakness of domestic firms’ trade administration, and improving it is a domestic capability question rather than a negotiating one.
The regulatory collision
The third strand of Khanh’s argument concerned the changing content of trade agreements and the conflicting demands exporters now face.
Modern agreements have moved past basic tariff cuts, adding requirements on sustainable development, labour rights, economic security and supply chain trust. An exporter serving multiple major destinations now faces regimes that are not merely different but sometimes incompatible.
The United States emphasises supply chain trust and forced labour prevention, with instruments under Sections 301 and 232 that require exporters to demonstrate the provenance of inputs several tiers deep. China enforces Orders 248 and 249 on supply chain controls and registration for food exporters. The European Union applies labour and environmental standards, the carbon border adjustment mechanism, and protective steel quotas.
Khanh described the result as compliance deadlocks for Vietnamese firms attempting to audit multi-tier suppliers. A firm that must document input origin to satisfy one jurisdiction, register its facilities to satisfy another, and calculate embedded carbon to satisfy a third is running three separate compliance programmes over the same supply chain, frequently with the same upstream suppliers refusing to provide the information each requires.
His recommendation was structural. Rather than relying solely on standard certificate of origin documentation, companies should compile comprehensive compliance dossiers covering origin proof, supply chain mapping and alternative supplier lists. Exporters should evaluate tariff margins, origin rules, technical barriers and total compliance costs before entering target markets rather than after.
“Diversifying both export markets and raw material sourcing will prove essential to safeguarding Vietnam’s position in global trade,” Khanh said.
Reaction
Reaction within the Vietnamese business community has been mixed in a way that tracks the split in the export base.
Industry associations representing domestic small and medium exporters have broadly welcomed the ministry’s framing, which validates a complaint they have been making for years: that the state has invested heavily in negotiating agreements and comparatively little in helping firms use them. Their specific asks are practical, centring on subsidised origin advisory services, simplified certificate issuance, and a searchable database that maps products to applicable preferences across all 17 agreements.
Foreign-invested manufacturers view the matter differently. For a multinational operating a Vietnamese plant as one node in a global network, preference utilisation is a group-level optimisation and the Vietnamese utilisation rate is an artefact of decisions taken elsewhere. Several such firms deliberately forgo preferences on shipments where the administrative burden across many stock-keeping units exceeds the aggregate duty saving.
Trade advisers working the Vietnamese market have noted a further point that the official framing understates. Low utilisation is not always a failure. Where a destination’s most favoured nation rate is already near zero, as it is for many electronics and machinery lines that dominate Vietnamese exports by value, there is no preference worth claiming. The utilisation figures are calculated across all eligible shipments, including those where the margin is negligible, which flatters the size of the lost opportunity. The Mexican example Khanh cited, with up to 50 percent duties on non-party competitors, is at the opposite extreme and is where the genuine loss sits.
That qualification does not dissolve the problem. It relocates it. The lost value is concentrated in specific product and market combinations where margins are large, and the policy response should be targeted at those rather than spread across the whole export base.
Economic impact analysis
The scale of the unexploited opportunity is worth quantifying roughly.
If Vietnam’s share of the European Union import market rose from 2 percent to 3 percent, on a market of 2.51 trillion dollars, that would represent additional exports of around 25 billion dollars. A one percentage point gain in Mexico, Canada and the United Kingdom combined would add materially further. Those are not trivial numbers for an economy of Vietnam’s size, and they are available in principle without a single new agreement being negotiated.
The constraint on realising them is not tariff policy. It is the capability of firms to meet the conditions attached to preferential access and to compete on the non-price dimensions that determine market share in high-income economies.
There is also a defensive dimension. Trade tensions between the United States and Canada have prompted Canadian buyers to diversify supply sources away from the United States, creating openings for Vietnamese suppliers. Openings of that kind are transient. They are captured by firms that are already qualified, already documented and already known to the buyer, and missed by firms that begin their preparation when the opening appears.
The broader lesson generalises well beyond Vietnam. Across the developing and middle-income world, governments have spent two decades negotiating preferential agreements on the assumption that access is the binding constraint. Where utilisation rates are low, access is not the binding constraint, and further negotiation addresses the wrong problem. The return on investment in customs modernisation, origin advisory services for small exporters, and supply chain documentation capability is in many cases higher than the return on another agreement.
Implications for importers, exporters and supply chains
For Vietnamese exporters, the practical agenda is specific.
Calculate the preference margin before deciding whether to claim. The margin is the difference between the most favoured nation rate and the preferential rate in the destination, and where that difference is small the compliance cost may genuinely exceed it. Where it is large, as in the Mexican case, the failure to claim is simply lost money.
Test qualification against every available origin criterion, not just the most obvious one. Product-specific rules in these agreements frequently offer alternatives, and cumulation provisions allow inputs from other parties to count as originating. A garment that fails a yarn-forward test may qualify under a de minimis allowance or under a short supply list provision.
Treat input sourcing as a tariff decision. Where an agreement’s origin rules exclude a major supplier country, continuing to source from it forecloses the preference. That is a procurement choice with a duty consequence, and it should be made with the duty consequence visible.
Build the compliance dossier once and reuse it. Origin proof, supply chain mapping and supplier alternatives serve multiple regimes. A firm that maps its suppliers to satisfy one jurisdiction’s due diligence requirement has done most of the work required for another’s origin verification.
For importers buying from Vietnam, the same figures carry a different message. A supplier that cannot furnish a valid preferential certificate of origin is costing the buyer the duty. Buyers should be asking suppliers directly whether preference is available on their products and, where it is, whether the supplier can support the claim. In many cases the answer will be that nobody has checked.
For supply chain planners more broadly, Vietnam’s position is instructive. It is among the most heavily agreement-covered economies in the world and among the most exposed to the compliance demands of the current trading environment, because it sits at the junction of Chinese inputs and Western demand. How Vietnamese firms resolve the tension between those two will indicate how the wider Asian manufacturing base adapts.
What to watch
Three indicators will show whether the diagnosis translates into action.
The first is whether utilisation rates move. Vietnamese authorities publish certificate of origin data, and a rise in the CPTPP number from below 10 percent would be the clearest evidence of progress.
The second is the Brazil negotiation and other pending files. If Vietnam continues adding agreements while utilisation of existing ones stays low, the negotiating programme is running ahead of the capability to use it.
The third is the domestic share of exports. The shift from roughly half to 20 percent over fifteen years is the structural issue behind the utilisation numbers, and any reversal would be the strongest signal that domestic firms are engaging with the trading system on their own terms.